Key metrics: (2Dec 4pm HK -> 9Dec 4pm HK):
BTC/USD +3.9% ($95,900 -> $99,600) , ETH/USD +7.4% ($3,640 -> $3,910)
BTC/USD Dec (year-end) ATM vol -0.6v (55.8->55.2), Dec 25d RR vol -0.7v (4.9 -> 4.2)
Spot Technical Outlook:
The price action continues to feel corrective despite the new high and print above $100k, with spot coming back fast and heavy. We continue to think that pops will be sold but dips will see good demand and therefore expecting a sideways corrective pattern here — possibly a triangle (extended flat) with resistance coming in between $99k-104k with support beginning at $94k and all the way down to $85k
Although price action can be choppy within the range initially, eventually we would expect realised volatility to wane (provisional on the range not breaking). A break below that would send up back to $76k. Any material break higher could cause us to move towards our terminal range of $115–120k ahead of our expected Jan-Feb timeframe
Market Themes:
Bitcoin finally printed through the psychological level of $100k last Thursday, triggering a run up to $104k which was tested twice and held on both occasions. This felt like a much needed resolution of the recent bull-trend but momentum waned quickly and we pulled back below $100k within the next 24 hours, then triggering a round of liquidations down to $90k as fresh longs above $100k were stopped out. However this was short lived and the market reclaimed $100k in the NY session before finding some broader stability in the $96–100k range
Altcoins continued to surge higher with sentiment broadly bullish, with ETHUSD also pushing above its own psychological level of $4k, though still 20% away from its ATH
Tradfi market price action was a bit more muted, with some noise around Martial Law in South Korea sparking brief worries (and sending BTCUSD briefly to $93k), though this proved to be nothing more than a local political move and was quickly faded. China once again stepped in with stimulus promises for next year, in response to the broad weakening in their markets since Trump won the presidency and promised a fresh round of tariffs. Finally, the US labour data continues to show signs of moderation with Friday’s NFP print doing nothing to de-rail the Fed’s path of gradual cuts and therefore keeping the macro backdrop broadly risk supportive
BTC$ ATM implied vols:
Overall a very volatile week in which we first tested down to $93k on the South-Korea martial law wobble, before breaking $100k and printing just shy of $104k, before reversing down to a low of $90k on liquidations. Despite all this, the high frequency realised came in at around 60vols — which is pretty much the average that we are pricing in for every week in Q1!
As a result, spikes in implied volatility have been for the most part faded particularly for pre year-end contracts. Unless the $90-$104k range cleanly breaks it will be very challenging for realised volatility to persist at these levels. Further out the curve however the market has seen some significant buying flow, particularly in March-June topside expiries ($150–200k), which has driven the premium higher for expiries Jan onwards. Again given the amount of volatility exhibited last week to sustain a weekly average of 60, it will be challenging for the market to hold these vols at these levels unless we have a clean range break
BTC$ Skew/Convexity:
Skew prices fairly static this week despite some pretty aggressive pullbacks in spot — ultimately demand for optionality continues to be on the topside of the distribution, with shorter-dated downside hedges the only real are of downside buying
Convexity generally traded higher this week as realised vol-of-vol ticked up this week and demand for outright wings (particularly on the topside) was seen
Good luck for the week ahead!
